MAHENDRAKUMAR MANSINGHKA,MUMBAI vs. INCOME TAX OFFICER 8(2)(3), MUMBAI

The assessee is aggrieved by the decision of the learned CIT(A) in confirming the disallowance of set off of mark to market loss from F & O transactions amounting to `28.14 lakhs.

The facts relating to the issue are stated in brief. The assessee filed his return of income on 29.07.2011 declaring total income of `9,60,440/- which consisted of income from house property of `2,79,300/- and income from other sources of `7,81,142/-. The return of income was processed under Section 143(3) of the Act. Subsequently the AO received information that the assessee has sold a property for `25.50 lakhs which was less than

Before the AO the assessee submitted that it had duly computed the capital gain by adopting the sale value at `32.16 lakhs and the capital gain was arrived at Rs17.04 lakhs. It was submitted that the entire capital gain was adjusted against the Mark to Market loss incurred by the assessee in F&O transactions. Accordingly the income from capital gain was returned at Nil figure and hence it did not form part of total income. Accordingly it was submitted that the loss from F & O transactions, referred above, should be adjusted against the Long term capital gain. The assessee had also adjusted a part of loss against income from other sources, which was also claimed in reassessment proceedings. However, the AO took the view that the assessee has made various adjustments at his whims and fancies and further observed that the assessee did not claim any such loss in the original return of income as per the details available in the original return of income. Accordingly the AO took the view that the claim for set off of loss was a new claim made by the assessee and did not allow the same. As noticed earlier, that the assessee had incurred loss of `28.40 lakhs from F&O transactions. The assessee has adjusted a sum of `17.04 lakhs against long term capital gain and `11.36 lakhs against income from other sources. As noticed earlier, the entire long term capital gain got adjusted against the loss and the assessee declared Nil income under long term capital gain. In similar manner assessee declared `7.81 lakhs under the head income from other sources after adjusting the loss of Rs.11.36 lakhs referred above. Since the AO took the view that the assessee has made the claim for loss for the first time before the reopened assessment, he did not allow the claim of set off of loss. The learned CIT(A) also confirmed the same.

We notice that, along with the original return of income, the assessee has also attached a statement of total income which clearly shows that the assessee has set off F&O loss of `28.40 lakhs against long term capital gain and also against income from other sources. Hence it is clear that the claim for set off of loss was not a new claim as observed by the AO in the reassessment proceedings. It can be noticed that, in the original return of income, the assessee has declared income from other sources at `7.81 lakhs, which is the net figure arrived at after adjusting the F&O loss of `11.36 lakhs. This fact makes it clear that the assessee has claimed F&O loss in the original return of income also, meaning thereby that the remaining loss of F&O transactions of `17.04 lakhs was adjusted against long term capital gain. Hence we find merit in the contentions of the assessee. Accordingly we are of the view that the assessee has made the claim of set off of loss in the original return of income itself. In view of the above we are unable to agree with the view expressed by the tax authorities. Accordingly we set aside the order passed by the learned CIT(A) on this issue and direct the AO to allow the set off of loss from F&O transactions against other income.